Strategic shift: Direct-to-consumer sales yields higher profits than B2B, says Indonesian ingredients firm Nekaboga

Having exported herbs and spices since 1988, Nekaboga is planning to shift from B2B to B2C markets.

This decision is driven by the competitive pressure to keep prices down, said Tony Lukmanto, head of sales and marketing at Nekaboga.

“Our pricing is always being compared against other competing suppliers, and the profit margin is lower than for B2C,”​ Lukmanto explained.

For Nekaboga, which has traditionally supplied bulk herbs and spices to global markets – primarily in Japan, Europe, the US, and Australia – the need for a business model switch is clear despite the competitive nature of the spice trade.

“We plan to leverage consumer trends in health and flavours, which are major trend drivers in the global food industry. The target is to produce for minimarkets within five years from now,”​ said Lukmanto.

Understanding regional flavour profiles​

Nekaboga’s potential success in the retail space will depend on understanding regional flavour preferences, which could shape the firm’s consumer-facing offerings.

For instance, Indonesia favours sweetness, while Thais tend to lean towards hot and spicy, according to Lukmanto.

Singaporeans have a relatively mild palate compared to other Asian regions, and this has to do with a growing focus on health and nutrition, underlined by the government’s policy of NutriGrade labelling for beverages.

Japan and South Korea have complex and diverse taste preferences, which include a strong demand for black pepper that is used widely for seasoning food.

By targeting specific consumer needs in each market, Nekaboga can tailor its B2C offerings to capture the nuances in regional demand.

Popular spices and new product offerings​

At the core of Nekaboga’s offering are staple ingredients like black pepper, white pepper, cinnamon, and cloves, which are already popular in various export markets.

These products form the backbone of their B2B business, but with an eye on the B2C transition, the company is exploring value-added products like spice mixes.

“We mix spices and herbs together to offer variety, like mixing coriander and white pepper. Such blends will appeal to consumers seeking both convenience and variety in food preparation,”​ Lukmanto said.

Turmeric is also an ingredient with a lot of potential – it can be used for cooking, for adding colour, and it also has health benefits.

Given turmeric’s multifunctional use across culinary and wellness categories, and the rising global interest in functional foods, its inclusion in new consumer products could help Nekabog enter health-focused markets, said Lukmanto.

However, the transition will come with challenges.

Navigating market trends and challenges​

As Nekaboga moves towards serving the retail space, it will need to navigate trends that are reshaping the food and ingredients industry. Sustainability, for instance, is a growing demand from both businesses and consumers.

Large corporations like Unilever and Nestlé are driving sustainability across the supply chain, said Lukmanto.

Additionally, consumer expectations for transparency and quality are also on the rise, especially when it comes to food safety and certifications.

“We have certifications like Kosher for Israel, USDA Organic, and FDA registration. In the retail landscape, where consumers are increasingly aware of sourcing and sustainability, these certifications will be key differentiators for Nekaboga’s products,”​ said Lukmanto.

Also, the fluctuating prices of raw materials due to unpredictable harvests and supply chain disruptions remain a constant hurdle. Prices will fluctuate according to farmers’ supplies. This can affect long-term planning, especially when introducing new products to price-sensitive consumer markets.

Nekaboga’s strategic plan for the next five years will likely revolve around building a stronger brand identity that resonates with end consumers, particularly in Asian markets.

The firm will rely on distribution partners to help navigate the complexities of local markets.

“We offer the product, but we don’t have enough knowledge of the local market. We will need friends in our distributor network to expand our presence across Asia, Australia, and beyond,”​ said Lukmanto.